Mongolia has agreed to implement an economic rescue package proposed by the International Monetary Fund (IMF) and refinance bond loans, easing the nerves of international investors and the business community fearing Mongolia might go default on its loan in March.

"The Mongolian government agreed to issue another commercial bond to replace the current 580-million-U.S. dollar bond due to be matured in March 21, 2017 at the suggestion of IMF," Mongolian Finance Minister Choijilsuren Battogtokh said on Sunday.

Koshy Mathai, the IMF mission chief for Mongolia, said the two sides reached an agreement on the program under the Extended Fund Facility.

It covers a period of three years, with 440 million dollars in financing from the IMF, and about 3 billion dollars from bilateral and multilateral partners, he said.

He added that this was a staff agreement only and was subject to confirmation of financing from the partners to the program and a few "prior actions."

The negotiation with the IMF lasted six months and was concluded at 1:30 a.m. local time on Sunday (1730 GMT Saturday), the Mongolian finance minister said, calling it a tough negotiation.

The minister listed three main conditions Mongolia has agreed upon.

"The 2017 budget has to be revised before the IMF executive board approval of the program. Secondly, the Mongol Bank must stop financing the mortgage scheme and transfer responsibility for the scheme to the government. Thirdly the Mongol Bank must stop any funding activities that fall outside the budget," he said.

The program is expected to be implemented in several stages when Mongolia revises its taxation laws and reduces social welfare spending which are conditions of the IMF program.

The looming 580-million-dollar bond was issued five years ago by the Development Bank of Mongolia with government guarantee. Most of the loans went to show-case projects such as construction of public roads and heavy industrial plants with no prospect of immediate returns.

Mongolia's total debt stands at 21.6 billion U.S. dollars including government loans, government guarantees and private company loans.

Mongolia's largest international bond, known as the Genghis Bond raised in late 2012, is due to be repaid in installments in 2018 and 2022. Endi